European shares turn higher as Wall Street rallies

Banking group Standard Chartered and airlines rise

SarahTurner

LONDON (MarketWatch) -- European shares turned higher Monday, helped by deal news and transport sector gains, and boosted by a rally on Wall Street as the Dow Jones Industrial Average hit a record.

The U.K. FTSE 100 index (UKX) closed up 0.2% at 6,166.10, helped by gains in Standard Chartered on speculation that Dubai's state-owned investment company was considering raising its stake in the Asian-focused bank.

European stocks reversed losses to close higher as the Dow Jones industrials reached a record after shares of Wal-Mart Stores Inc. shot up on plans by the retail giant to slow new-store growth and slash capital spending. See full story.

Elsewhere, the French CAC-40 index (1804546) gained 0.7% to 5,411.81 and the German DAX Xetra 30 index (1876534) rose 0.6% to 6,242.91.

On the negative side oil giants such as BP
BP, +1.15%
(BP) declined as the light sweet crude contract weakened by 92 cents to $58.42 a barrel.

"Markets are skeptical about OPEC's ability to deliver on production cuts," said Kevin Norrish at Barclays Capital, noting the oil-price decline.

Also, Royal Dutch Shell (RDSA)
RDS.A, +0.45%
eased 0.2% after it said that it approached Shell Canada's board with the intention of acquiring the minority interests in Shell Canada for around C$7.7 billion.

A report in the Observer over the weekend added to news on the oil giant after it said operational costs on the Sakhalin gas project off the Russian east coast could soar to $28 billion from a previous estimate of $15 billion. Shell holds a 55% stake in the project.

Airlines Air France-KLM (003112) and Deutsche Lufthansa (823212) benefited from the lower oil price, rising more than 2%.

In the currency markets, the dollar strengthened against both the euro and the British pound on speculation the Federal Reserve may say this week that further tightening will be necessary to control inflation.

A decision is expected Wednesday, and the widely held belief is that the Fed will leave rates unchanged at 5.25%. See full story.

German investors also had their share of deal speculation. Shares in Techem (547160) rose more than 16% to 49.31 euros a share after the company reportedly received a buyout offer from Australian investment bank Macquarie Bank, which it later rejected.

Analysts at WestLB noted that Macquarie has bid 44 euros a share for the company and already holds 17% of the company. WestLB also upgraded the company to add from hold.

Also in deal news, banking group Standard Chartered (STAN) rose 2.7% after saying it had gained majority control of Hsinchu International Bank, marking the first takeover of a Taiwanese bank by a foreign firm.

The company was also touted as a target after the Observer reported that a Dubai investment group could sharply increase its stake in the bank, which derives more than 90% of its profit from Asia, Africa and the Middle East. See full story.

Corus Group was also in focus after German steelmaker ThyssenKrupp (750000) said it is not considering making a bid for the Anglo-Dutch steelmaker.

Corus already has one offer from India's Tata Steel, but speculation has persisted that the company could receive competing bids.

Over the weekend, the Sunday Times reported that Corus could get a competing offer from Brazil's CSN, after investment bank Lazard refused to comment on reports it has been appointed by CSN to examine counter-bid options.

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